Hero into M&A gear for 4-wheel spares foray

NEW DELHI: Hero group is charting an aggressive foray into auto components for four-wheelers and will consider overseas and domestic M&As to grow that business. Speaking to ET, Hero Honda MD Pawan Kant Munjal said: “The auto component business would be majorly four-wheeler related because that’s where bigger opportunities lie.”

As for inorganic growth, he said, “We would surely look at M&As in auto components. There are a lot of opportunities in the West where companies haven’t been doing well. It’s one way of getting into a business very quickly.” As for domestic inorganic growth, it depends on “availability of opportunities. We will look at all kinds of options to grow the business,” Mr Munjal said.

For the two-wheeler part of the component business, the strategy is to look beyond Hero Honda. “Since so far, the two-wheeler component businesses in the group have been trying to keep up with Hero Honda’s growth, we will look at opportunities to grow outside of Hero Honda in two-wheeler components,” he added.

And like other diversifications, the component business will be a group venture. “The auto component business will be part of Hero group just as the two-wheeler component companies are part of the Hero group,” Mr Munjal said.

As for Hero Honda, the motorcycle market leader is open to seeking spares synergies through umbrella Honda subsidiary Honda Motor India (HMI) if there’s “merit” in doing so.

“Synergy can always take place,” Mr Munjal said. Already, there are common suppliers between Hero Honda and HMSI and Munjal Showa supplies to both Hero Honda and Honda Siel. “Going forward, we will try for more synergies and if there’s merit in doing something going forward, we would surely be open to looking at it,” he added.

The reason Hero Honda stayed out of the HMI umbrella is because the three companies that have joined are “either 100% Honda subsidiaries or Honda majority companies but Hero Honda has a different structure altogether,” Mr Munjal explained. Along with auto components, Hero group’s future blueprint also includes a foray into four-wheelers but that may mean commercial vehicles instead of passenger vehicles.

“I have never said what category or type of product we will get into,” Mr Munjal said. “All I have said is that it will be four-wheelers. These are early days and our focus will depend on where the bigger market opportunity lies.”

The group, he said, is “scanning the environment” for suitable partnerships in the four-wheeler venture. “As a group our eyes and ears are open,” Mr Munjal said. “If we find something interesting in terms of product line, company and opportunity, we will go for it.”

Explaining that the diversification is for the group, he said: “Very clearly I am talking of the Hero group, not Hero Honda. There’s no question of Hero Honda getting into four-wheelers. For the Hero group it’s a natural progression from bicycles to mopeds to motorcycles and beyond.” The group foray means that there’s no way Hero would rope in two-wheeler partner Honda in the four-wheeler business.